Correlation Between Hainan Mining and Fujian Rongji

Can any of the company-specific risk be diversified away by investing in both Hainan Mining and Fujian Rongji at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hainan Mining and Fujian Rongji into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hainan Mining Co and Fujian Rongji Software, you can compare the effects of market volatilities on Hainan Mining and Fujian Rongji and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hainan Mining with a short position of Fujian Rongji. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Mining and Fujian Rongji.

Diversification Opportunities for Hainan Mining and Fujian Rongji

0.35

Correlation Coefficient

Hainan Mining  Fujian Rongji

Weak diversification

The 3 months correlation between Hainan and Fujian is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Fujian Rongji Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Rongji Software and Hainan Mining is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hainan Mining Co are associated (or correlated) with Fujian Rongji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Rongji Software has no effect on the direction of Hainan Mining i.e., Hainan Mining and Fujian Rongji go up and down completely randomly.

Pair Corralation between Hainan Mining and Fujian Rongji

Assuming the 90 days trading horizon Hainan Mining Co is expected to under-perform the Fujian Rongji. But the stock apears to be less risky and, when comparing its historical volatility, Hainan Mining Co is 2.35 times less risky than Fujian Rongji. The stock trades about -0.01 of its potential returns per unit of risk. The Fujian Rongji Software is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  628.00  in Fujian Rongji Software on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Fujian Rongji Software or generate 6.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hainan Mining Co  vs.  Fujian Rongji Software

Hainan Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hainan Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hainan Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fujian Rongji Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Rongji Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Rongji may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hainan Mining and Fujian Rongji

The main advantage of trading using opposite Hainan Mining and Fujian Rongji positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hainan Mining position performs unexpectedly, Fujian Rongji can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fujian Rongji will offset losses from the drop in Fujian Rongji's long position.

The idea behind Hainan Mining Co and Fujian Rongji Software pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.